St. Joseph loses $400,000 every day it can't bill Medicare

University of Maryland St. Joseph Medical Center loses about $400,000 every day it's not certified by Medicare to collect payments from the federal health care program.

The big question is how much that will ultimately cost the Towson hospital. Tens of millions of dollars could be at stake.

The University of Maryland Medical System voluntary gave up the Medicare certification when it bought St. Joseph from Denver-based Catholic Health Initiatives in a $206.3 million deal that closed in December. The medical system, looking for a clean break from troubles St. Joseph faced under the previous owners, chose instead to apply for a new certification.

But in December, St. Joseph failed an inspection by the Centers for Medicare & Medicaid Services, which oversees the health program, needed to get a new certification. It quickly addressed the problems and is awaiting results of a second survey conducted this month. But while it waits, St. Joseph remains unable to collect Medicare reimbursements.

Federal officials said St. Joseph won't be able to bill until it meets its requirements.

"The effective date of the hospital's participation in Medicare will be the date it submits an acceptable plan of correction, and that is the earliest date the hospital will be permitted to bill for services," the agency said in a statement this week.

St. Joseph believes it became eligible for payments as of Dec. 14, when it submitted a plan to the agency showing that it had corrected the issues identified in the December survey and was in compliance with federal guidelines.

St. Joseph officials have declined to discuss the case but revealed their position in a financial statement. The hospital reported that it lost $5.2 million in revenue in the two weeks it believes it was not Medicare-compliant.

The financial statement also for the first time detailed how much the University of Maryland spent to acquire the troubled medical center. The medical system took out a $220 million short-term loan to cover the acquisition's cost and working capital, the filing said. It hopes to refinance this year with a state-backed bond.

The financial burden of the merger, including the additional debt, has caused some concern among bond rating agencies, including Standard & Poor's, which downgraded the rating of the University of Maryland Medical System from A to A-.

S&P Director Stephen Infranco said his team wasn't overly concerned about the lack of Medicare certification and figured it would be a short-term problem. He expects things to eventually turn around.

"UMMS just got in there and probably hasn't gotten a chance to put their stamp on things and make the changes they see fit," Infranco said.

But the agencies were working off the University of Maryland's assumption about when it will be able to bill Medicare. In its report, Moody's noted that the hospital wasn't able to bill for Medicare for two weeks. Moody's maintained its A2 rating, but lowered its outlook from stable to negative. Fitch maintained its A rating.

Moody's analyst Beth Wexler said she believes the certification issue will be resolved and have little impact on the system's finances. "I think it is all built into their model and is short-term," she said.

The labor union that represents hospital workers is concerned. It worries that the University of Maryland isn't being forthcoming with the potential financial impact of not having Medicare certification.

"This apparent delayed disclosure around the loss of Medicare certification could harm patient care and put financial strain on the system, which gets [much] of its funding from public sources," said Vanessa Johnson, vice president of 1199SEIU United Healthcare Workers East. "The University of Maryland Medical System must be more transparent and accountable to the people of Maryland."

Losing Medicare revenue for even a few weeks adds further financial strain on the hospital as it attempts to rebuild. It is expected to take five years for St. Joseph to make a profit once again.

Medicare accounts for 41 percent of hospital revenue, on average, according to the American Hospital Association. It makes up 45 percent of St. Joseph's patient services revenue, according to the financial statement.

The certifications also have further ramifications. Medicare certification is a condition for participating in the Medicaid program. A spokeswoman with the Maryland Department of Health and Mental Hygiene said the agency is "reviewing applicable laws and regulations so we can apply them appropriately in this case." Doctors who work for the hospital, not those in private practice, also can't bill Medicare while the certification is in question.

The University of Maryland said it knew the risk it was taking by reapplying for certification.

"UMMS expected that there would be some period of time during this transition when we would not be able to bill Medicare for services we were providing to patients at the hospital," said Mary Lynn Carver, its spokeswoman and a senior vice president.

She said the hospital will discuss back-payment options with federal officials once certification is obtained.

The December survey holding up the certification cited several issues at the hospital. Among the issues were surgical assistants in cardiology who were not properly supervised during procedures and pain medications that were not stored and disposed of properly. The survey also cited incomplete medical records, including one instance in which a patient's allergies weren't properly recorded, leaving her in danger of getting the wrong medication.

St. Joseph officials said any issues that posed an imminent threat to patient safety would have been addressed immediately.

"It is critical that patients and the community understand that there were no such urgent deficiencies or issues found," Dr. Mohan Suntha, University of Maryland St. Joseph Medical Center CEO, said in a statement.

Suntha said the second survey conducted this month didn't cite any of the issues found in the December survey, proof that the hospital had addressed the issues. He noted that in the case of the patient's allergies, the survey finding was that they were not documented "consistently" in all areas of the patient's records and that the hospital has corrected the problem.

The University of Maryland bought St. Joseph as the hospital struggled to recover from troubles that started when star cardiologist Mark Midei was accused of putting unnecessary stents in heart patients. Midei has denied any wrongdoing, but his medical license was revoked.

The case has resulted in hundreds of patient lawsuits and challenged the reputation of the hospital, which has lost patients and doctors and reported steep revenue declines.

In most hospital acquisitions, the Medicare certification is transferred to the new owners, but the University of Maryland was likely trying to protect itself from future liability. The university is not responsible for any previous lawsuits under its agreement with previous owner Catholic Health. It could have been responsible for any previous Medicare fraud issues if it had kept the old Medicare certification.

St. Joseph, when owned by Catholic Health, previously paid the federal government $22 million to settle allegations of a kickback scheme involving the cardiology practice where Midei once worked and to repay Medicare payments received for stents he implanted. Last week, Catholic Health agreed to pay the federal government $4.9 million for overbilling the Medicaid and Medicare systems for unnecessary hospital stays from 2007 to 2009.

It is unclear when St. Joseph will receive certification, but hospital officials say that care of Medicare patients has not changed.

"We have received many calls from Medicare patients unsure if they can still come to UM-SJMC for care," Suntha said. "We want to reassure patients that we have been and will continue to provide high-quality medical care to Medicare patients during this transition."

The previous owner of University of Maryland St. Joseph Medical Center has agreed to pay the federal government $4.9 million for overbilling the Medicaid and Medicare system by keeping patients in the hospital longer than needed.